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Get the EPA Out of the Way of American Exporters

EPA exporters AmericanWhen Americans think of exporting goods, they rarely, if ever, think of ethanol. But America has a growing ethanol export industry being constrained by the Environmental Protection Agency(EPA). A few minor changes to rules within the EPA can create a substantial increase in ethanol exports, which means more work for everyone in the value chain for ethanol from the farmer to tanker. Creating more demand for your product makes economic sense.

The Renewable Fuel Standard (RFS) is a federal program that requires transportation fuel to contain a minimum amount of renewable fuels. The program originated in the Energy Policy Act of 2005, H.R. 6. The RFS was later amended with the passage of the Energy Independence and Security Act of 2007, H.R.6. The statute required the U.S. to use four billion gallons of renewable fuel starting in 2006 reaching thirty-six billion gallons in 2022.

In the current system, Renewable Identification Numbers (RINs) are generated for each denatured gallon of ethanol produced in the U.S. When the biofuel is exported the RINs are retired, satisfying the Renewable Volume Obligation (RVO). It is important to remember, the RINs themselves have value, and are traded like commodities.

Blending ethanol domestically results in RIN value that encourages increased ethanol production and use. The majority of export gallons are never assigned a RIN. The export gallons that are assigned RINs also receive a matching RVO, thus creating a disincentive for exporting ethanol relative to domestic blending of both US-produced ethanol and imported ethanol.

The President and the EPA can make two minor changes to EPA rules to increase the amount of ethanol exported, thereby increasing overall U.S. exports.

  1. Revise “ethanol” within the definition of “Renewable Fuel” to include both denatured and undenatured gallons of ethanol intended for fuel use.
  2. Remove the export RVO on all gallons of exported ethanol intended for fuel use.  This change would also include accompanying changes to compliance and recordkeeping provisions for exports.

Ethanol can be denatured or undenatured for fuel use. If ethanol is denatured, it has been altered with additives to make it bad tasting, foul smelling or nauseating. Undenatured ethanol has none of the additives. For ethanol to qualify in the RFS, it must be denatured, under current EPA regulations. Because of the rule, only denatured ethanol get RINs. This presents a problem for many ethanol exporters.

Many markets outside the United States, such as Brazil and India, specifically require ethanol to be undenatured. In 2016 the U.S. exported 1.05 billion gallons of ethanol to more than 50 countries, with more than fifty percent of exports going to Canada and Brazil.

Because markets move quickly, and governments move slowly, it is in everyone’s best interest if the EPA definition of ethanol included both denatured and undenatured. Updating this would align the definition of ethanol with the present day global market realities, which demand both undenatured and denatured ethanol for fuel use. It would also allow refiners and exporters to rapidly adapt to unfolding events such as natural disasters or political instability.

Removing the RVO on exported volumes would remove a self-imposed non-tariff barrier to trade in ethanol and enhance U.S. energy security by enabling a U.S.-produced energy source to meet global demands. Ethanol would join liquid natural gas and crude oil as part of a new era in U.S. energy dominance.

As ethanol exports rise, U.S. ethanol producers can increase production despite challenges in the domestic market. Increased production means more shifts for plant workers, more farm equipment purchased, and more loads for truck drivers. All high paying jobs that expand the tax base.

Ethanol producers would also benefit from holding separated RINs from ethanol exports that they can sell to obligated parties for compliance. This change would also benefit obligated parties by increasing liquidity and ameliorating the potential for RINs price spikes that threaten domestic refining.

President Trump has made narrowing the trade deficit a mission of his administration. These two small rule changes could significantly increase U.S. exports while creating jobs. The rule changes would give U.S. exporters the chance to compete on the international stage. The EPA needs to make the rule changes and get out of the way of American ethanol exporters.

From - - by Printus LeBlanc

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5 years ago

Get the EPA out of the way of exporters? How about just get the ethanol out of gasoline – period! It’s inefficient, wastes water, uses corn that could be better used as food, and on and on and on! The only people getting any good out of ethanol are corn farmers and corporations – we could do without those kinds of corporations, and farmers can go back to growing corn for food!

5 years ago

This complaint really doesn’t address the real issue: corn subsidies for ethanol production. The fact that Ted Cruz
opposes corn subsidies should tell us something…few have the guts to do so. The corn lobby in this country
doesn’t need more help. Corn is a poor source for ethanol, compared to other materials. Why continue this
wasteful use of farm land all the while enabling the corrupt, wasteful and expensive corn lobby?

Elton Yancey
5 years ago

I have always thought it was stupid to use a food crop for a fuel.I’m sure many people around the world would love to have some of this corn to eat.

5 years ago

There is a third option not mentioned. Since ethanol is actually less energy efficient that straight gasoline and does nothing to significantly lower total emissions when one includes its production process for ethanol in the total numbers, why not simply advocate for the end to this defacto tax on the American consumer by repealing ethanol’s mandated use in domestic gasoline. Correct the initial error. Don’t try to create a more convoluted, bureaucratic set of criteria for people to jump through, simply because that is how Washington normally operates. Think like a businessman concerned for his customers, not a politician only concerned with re-election. The Iowa farmers would then be free to still produce all the ethanol they want, but they could sell all of it for export only. No more forcing the American consumer to buy this stuff, which is so corrosive that it requires it be shipped via tanker trucks or specially designed tanker railroad cars instead of through pipelines. All the ethanol produced for export could then be made of the undenatured variety, which is what the export market seems to favor anyway. Yes, I understand the total amount of ethanol produced and sold would go down, but why should the American people have to continue a flawed policy indefinitely?

As for the RIN / RVO credits, that whole market exists solely because of our bad decision involving ethanol inclusion in gasoline in the first place. Another example of bad economic / environmental policy from G.W. Bush. Another Progressive Republican who liked to pretend he was conservative. More accurately, he liked to refer to himself as a “compassionate conservative” (code for RINO). That market will sort itself out as the value of the RIN / RVO credits re-price to what the market values them at.

Of course I realize that this option won’t likely ever happen. I certainly can’t see the majority of RINO’s currently in Congress voting for it. This would be the response of a free market based solely supply and demand economics and proven environmental results, which of course the ethanol market is not. The ethanol market is based solely on environmental mandates for the use and inclusion of ethanol in automotive gasoline to achieve a result that has been completely discredited at this point. Yet the mandate will remain simply because most politicians lack the will and courage to undo any federal program once it is in place. It’s like the government mandating the purchase of government-designed healthcare insurance plans (Obamacare). Yes, new jobs are created to manage the resulting bureaucracy, in the case of Obamacare mostly in the federal government, but the underlying premise is fatally flawed and NOT based on what either the public wants or desires to spend their money on.

5 years ago
Reply to  PaulE

PaulE, you sure get my vote! Agree with all you say in principal and in fact. I respect the way you analyze and break down the problems these articles expose. Thank you.

5 years ago
Reply to  PaulE

I’ve got a better solution … make all the politicians who favor this garbage be forced to drink a fifth of it if it’s so safe. Betcha that would make cornholers out of them. Oh wait, they probably already are!

Ivan Berry
5 years ago
Reply to  PaulE

Right again, PaulE, and RIN/RVO just sounds too much like Carbon Credits.

5 years ago
Reply to  Ivan Berry

That is essentially what they are Ivan. All these so-called green initiatives share the same model: create a artificial market through government mandates for a product or service, create a stream of revenue via “tradeable credits” that flows through third-party market participants in the market place that ultimately ends up in government coffers (stealth form of taxation without calling it a tax). The government officials that created the market distorting green initiative get the extra tax revenue they wanted in the first place. Their partners in the private sector that supported the scheme get their promised slice of the pie in exchange for their commitment to make sizeable campaign contributions to the appropriate re-election races and the politicians commitment to continue the scheme for as long as they hold office. The only losers in this model are of course the people and the segment of the free market the particular scheme has distorted. Neither of which is valued by either the politicians or their partners. Their only concern is the money they collect and the power they accumulate.

Ivan Berry
5 years ago
Reply to  PaulE

You never fail to amaze with your ability to bone out the particulars and the patience to even bother,

John Degges
5 years ago

Enact an law that voids the law that demands that engines be destroyed by the fuel used in them and, even worse, reduces the amount of corn available for food.

5 years ago

Undenatured ethanol is basically 200 proof vodka.

5 years ago

There are better ways to make ethanol without burning food. Switch grass would be much more efficient. And yes ethanol does destroy small engines and it reduces mpg on automobiles. So a loose loose government program. The middle class suffers again.

5 years ago

Its great that AMAC is providing this insight. The key question however, is how to get visibility of this to the White House to actually make the change.

john boy
5 years ago

You city folk may not know the damage this additive does to small engines [with carbs] it eats the metal up in side..very costly to small business…bov wanted to increase % to 20% and the car co said they would not warranty engines..what does that tell ya???

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